The SBA 8a application lacks a list of clearly defined instructions from the SBA and has many pitfalls and potential traps. This is partially by design in order to increase the likelihood that the applicant discloses potentially damaging information in the application. The following are some tips and practical advice to AVIOD on your 8a application.
#1. AVOID making your wife the president of the company when she has very limited involvement with the firm because you are thinking this will give your application added consideration or so that you can apply for woman owned business certifications as well.
#2. AVOID having family members guarantee, leases, loans, and bonding and not disclosing these facts to the SBA.
#3. AVOID having the 8a applicant having another job, and not giving full time devotion to the applicant concern.
#4. AVOID having your firm’s tax accountant being overly aggressive with your firm’s financial records such that the firm shows a loss or has a negative net worth in the year prior to applying.
#5. AVOID giving secret voting powers to the non-managing member of the applicant concern.
#6. AVOID too many contracts obtained from past employers or family members.
#7. AVOID giving away cash to close relatives in order to lower your adjusted net worth to qualify for 8a as the SBA will go back three years in search of transfers.
#8. AVOID having too many Board of Directors of the firm.
#9. AVOID not disclosing a past arrest even if it was expunged.
#10. AVOID only engaging in business activity that is “brokering” in nature where the firm does not take possession of the physical inventory or does not directly provide the service.
#11. AVOID subletting space from another company in a similar industry.
#12. AVOID letting a prior majority owner of the firm remain active in ownership/employment/officer of the firm.
#13. AVOID borrowing money from anyone other than a bank.